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Just wondering if planning to buy a property with a BTL mortgage in an area of flood history would you be required to to have flood insurance? I know with a residential mortage you would require it but unsure about BTL lenders? The reason I ask is I have a house in mind which I know with some work I could build a flood prevention system around it (aka large wall with emergency pumps behind it). Im willing to take the risk as I know I can make the property resistant to floods but would the lenders require the insurance anyway? The reason I ask is because I dont want to pay thousands a year in insuance when I know the property could withstand a flood anyway. Would the banks take that into account?
Also if the banks do require flood insurance would they remove this from the amount which they feel the property could make in terms of rental income meaning they would lend less on it? Eg rough example, a normal property in a none flood area makes 10k a year rent and is valued at 100k by the bank. If the same property making 10k a year rent but in a flood area (with insurance costing 2k per year) would the bank therefore only value it at 80k (as 10k rent minus 2k cost of insurance is 8k)
I was able to get a reasonable costing insurance with "Total Landlord" (under £400) for a flood-risk property. However, the downside was that the excess for flood damage was pushed up to around £5K.
Flood risk areas are a problem as it all comes down to ‘valuer’s comments’. Your comments are indeed valid and (I think it was Grand Designs) I have seen a house on a river bank that is prone to flooding being constructed such that it can float a couple of metres should the river burst its banks and I wonder if any valuers treat it as ‘normal’ due to its construction.
However all lenders will require building insurance and if the area is prone to flooding they will only pick that aspect up via the valuer. The outcomes will either be to proceed with a standard buildings insurance policy (if flood risk is not mentioned by the valuer at all), or to ensure flood risk cover is in place (to be confirmed by the solicitor) or a straight decline. If it is a decline it is often the result of the fact that the property is deemed to be harder to sell in the future (should the property get repossessed).
One way to head things off is to choose a lender/product that you want but before the application is submitted ask the lender to contact the valuer up front and ask what the likely result is going to be. This can rule lenders out and save you some frustration not to mention valuation fees.
I hope this helps,
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The GD riverbank house was in reality a houseboat.
Aldermore consider flood risk properties as long as the buildings insurance cover includes the flood risk cover.I believe they do a maximum LTV of 65% but I can't be sure if their lending criteria has changed since.I just did a BTL property with Paragon that was in a 'flood risk area' they declined the application because the valuation came back at property being in flood risk - however I made an appeal because it wasn't actually that close to a river source and it had never had a history of flooding - there was also landlords insurance which included the flood risk cover - on the basis, the appeal was overturned and the application accepted to proceed to offer.It really depends on the lender, not just the valuer. Some valuer's are not accurate in stating what is flood risk and not flood risk - the government flood risk maps stated my clients property wasn't even in a flood risk area!
Jacko, is buying that property really worth the hassle?